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An offer by Vedanta Resources to de-list its Indian company Vedanta Ltd at ₹87.5 per share may not enthuse investors, shareholder advisory experts told BusinessLine .
On Tuesday evening, Vedanta Ltd disclosed to the stock exchanges that its UK-based parent and promoter Vedanta Resources had said it would offer ₹87.5 a share to acquire 49.86 per cent public shares and de-list the company from Indian bourses. The offer price was fixed at a 9.9 per cent premium to Monday’s closing price of ₹79, it added. Vedanta’s board will meet on May 18 to discuss the deal.
Experts called it a highly opportunistic move by the UK promoter and a massive failure on the part of Vedanta Ltd’s independent directors if they did not ask shareholders to oppose such a move. Vedanta shares rose to touch a high of ₹98 on Wednesday.
Call for probe
Anil Singhvi, former MD and CEO of Ambuja Cement and founder and director at proxy firm IiAS, called the de-listing offer ‘miserable’. SEBI and the stock exchanges should probe a 12 per cent rise in Vedanta’s share price on Tuesday ahead of the announcement, he said.
“It will be a failure on the part of Vedanta India’s independent directors if they do not ask minority shareholders to oppose the deal. The de-listing price is a joke. Essar paid nearly double the price to minority shareholders after the valuation report was submitted. Such a report will suggest that Vedanta’s value is way higher. Its shareprice was trading at ₹160 in January before tragedy stuck and markets fell due to a ‘black swan’ event. Promoters are seeking to benefit from this. The offer should fail as the price offered is miserable,” Singhvi said.
Essar was made to pay ₹246 to minority shareholders after a re-valuation against its earlier offer of ₹146. In Singhvi’s view, SEBI should ban de-listing till September, “in minority shareholder interest, as promoters are excessively greedy even during human tragedy.”
“It is not surprising any more when company shareprices run up sharply before key announcements,” said Amit Tandon, founder, IiAS.
Merged companies’ valuation
Vedanta’s value should be much higher considering the companies merged into it in the past had a higher value than its current offering, said experts. In September 2013, Sesa Goa, Sterlite Industries, Madras Aluminium Co, Sterlite Energy and Vedanta Aluminium were merged into Sesa Sterlite.
In February 2015, Sesa Sterlite was renamed Vedanta Ltd for better alignment with the parent firm. The move was aimed to create a natural resources giant to combat global rivals BHP Billiton and Rio Tinto. On March 31, 2015, a 58.9 per cent stake in Cairn India purchased by Vedanta Resources in 2011 was transferred to Vedanta Ltd, which alone was worth more than ₹14,000 crore.
Also, Vedanta holds a majority stake in Hindustan Zinc Ltd (HZL). At ₹87.5 per share, Vedanta’s equity value is less than ₹30,000 crore, which is way lower than that of some of its subsidiaries. As on May 12, HZL’s full market-cap was more than ₹75,000 crore. At 65 per cent, Vedanta’s holding in the company is valued at ₹49,320 crore.
JN Gupta, former ED, SEBI, who now runs shareholder advisory SES, said one group company reflects more value than Vedanta put together. “If Hindustan Zinc is demerged from Vedanta and the shares held by Vedanta are distributed, for every share of Vedanta held, a shareholder will get 0.74 shares of HZL, valued at ₹132, while keeping the Vedanta shares intact,” he said.
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